The "protection" that SIPC provides is at best misleading. Investors see the logo and have presumptions about what it is and how it works. These are typically not dispelled by financial advisors selling SIPC branded products. It would be best if the SIPC protection matched investors expectations (similar to FDIC coverage).

SIPC branded products should protect the investor from losses in their account (under certain circumstances) NOT create a contingent liability for the investor beyond the risk of losing their investment. Clawback is a contingent liability unknowingly assumed by the investor in a SIPC backed product. For someone to spend their lifetime investing in a SIPC branded product, to retire and start living off their investment, then not only find out that the investment was a sham and all their investment and income gone, but further to be sued for additional funds to make others whole is misleading, unfair, and unreasonable.

Clawback on the basis of cash in/cash out is unfair. Clawback on the basis of fraudulent action is reasonable and justifed.

Separately, compensation on the basis on final statement value would allow investors to continue without being wiped out. It also means that investors would know where they stand.